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Kuwait is facing the challenges of the financial imbalance and chaos
4/1/15
Despite the decline in Kuwait's oil revenues affected by a decline in prices since July 2014, has exceeded the fiscal deficit in the budget of 2014 and 2015, estimated at 7.48 billion dinars ($ 25.3 billion), and recorded a surplus of $ 4.13 billion dinars (13.95 billion dollars) period of 11 months, from April / April 2014 to the end of February 2015, any one month of the fiscal year that ended at the end of March before last.
But the loss of Kuwait emerged in a surplus budget of 60% compared with the surplus in the same period of the previous year (2013 2014) and of 10.4 billion dinars (about $ 35.1 billion), as a result of revenue fell 20 percent to 23.2 billion dinars (78.4 billion dollars) during the period of 11 months, compared with 28.93 billion dinars (97.8 billion dollars) in the same period of the previous year, but recorded an increase of 4.8 billion dinars for the initial estimates of the budget, amounting to 18.4 billion dinars.
It was noted in the area of comparison, that with the decline in oil revenues, and thus fell share in total revenues of 94 percent in the fiscal year (2013 2014) to 91% in fiscal year (2014 2015), non-oil revenues jumped by 73% to 2.01 billion dinars, as a result of higher revenue generated and varied charges including fees for services (electricity and water), taxes and duties on trade and customs, which is a positive sign comes in the framework of the Kuwaiti government's efforts to diversify sources of income, which is expected to include a tax on local companies by not less than 15% profits like the foreign companies, and in the light of recommendations of the International Monetary Fund, which currently is a detailed study of the implementation mechanism, commissioned by the Government of Kuwait, scheduled to be concluded during the period of 18 months.
According to the Ministry of Trade and Industry statistics, the number of public companies and closed, which is expected to target the upcoming tax bill in 2620 about the company, including 206 listed companies in the Kuwait Stock Exchange.
As for the budget of the new fiscal year, which began on Wednesday, the first of April / April, they carry a deficit of $ 24 billion, although cut spending by 17.8% to $ 65.1 billion.
Taxes and fees
The government has submitted to parliament its plan for the development of public finances and the diversification of revenue, to form the following:
Review pricing of public goods and services mechanisms, which offers mostly free or at prices less than a large proportion of the real cost, that are priced to reflect the real cost of the part, and enhances the non-oil revenue from the other side.
A comprehensive review of the fees charged by the state for services provided by the land leased, with a view to strengthening the non-tax revenues and diversify the public treasury of the state income sources.
The introduction of taxes on companies that currently apply only to foreign companies, we also extend to national companies, contribution to bear the cost of what is offered to them from the goods and services heavily subsidized, such as water, electricity and infrastructure earnings.
Linking the tax on corporate profits extent of success in the re-allocation of private investments for the benefit of non-oil activities rates, and are allowed to increase the number of working in this type of activity companies, can policy-maker of the use of the tax on profits as a tool of economic activity towards areas that seeks to activate it.
Impose some form of indirect taxes on consumption or sales, especially for goods unnecessary and consumer goods Altfajra that contribute to the formation of harmful consumption patterns of the individual and society, and adversely affect the tendency of individuals toward savings, and promotes unnecessary consumption and habits, values, and publishes simulation defended and tradition between citizens, leading to overburden the families spending the irrational and the occurrence of a lot of them in a debt trap.
Fee to use some of the main roads are protected electronically as applicable in Dubai or other countries of the world, and used the proceeds to road maintenance and the creation of more of them, and to expand its network and improve efficiency, so as to enhance the infrastructure in the state.
These proposals have been met with strong opposition among a large number of deputies and experts of finance and economy, describing it as developed in particular to add new burdens on citizens, a move away from the essence of the diversification of existing sources of income process on the creation of new economic sectors to generate revenue in the country.
As for the imposition of taxes on local companies, any additional funds will be borne by companies, will be paid to increasing the goods and services offered by the prices, and thus would be borne by the citizen.
Unanimously economists that the report prepared by the Ministry of Finance clearly reveals the government's inability to large, failing to create a synonym economic sectors for the oil sector to generate revenue in the country, as did the other oil states such as Saudi Arabia, which have been very successful in diversifying sources of income, and achieved growth rates distinct in real GDP, thanks to the industrial activity, which grew by 6.5%, to become the second most powerful economic activities performance in the UK during 2014, so that it plans to raise the proportion of the contribution of the industrial sector in the GDP to 20 percent, up from 11 percent that have been recorded in the last year, as well as the strong performance of the private sector, which recorded a growth rate of 5.7 percent, and has a major role in driving GDP growth, and the other example the United Arab Emirates, which has succeeded over the years to be a role model to diversify sources of income and take advantage of growth in the non-oil sectors, as well as the State of Qatar, which amounted to non-oil sector revenues which 18% of total revenue, and got an impressive share of tourism on them, taking into account the similarity of climatic and social conditions between Kuwait and all of Qatar and the UAE.
Diversification of the economy
Since the sixties of the twentieth century, and the Kuwaiti government put its plans cascading to diversify the economic base and provide support to oil revenues and rely better on the private sector and reduce dependence on foreign workers resources, but over the past years has not achieved any of these goals, but check reversible, where the contribution of the state have risen in various institutions and the growing role of migrant workers remained Treasury dependent by not less than 92% of the oil revenues, and remained the private sector's share of GDP below 25%, in light of the continuing disruption to software customization, the contribution of Kuwaitis in the labor market also remained as it was in 2010 They do not exceed 17% of the total labor force, and Kuwait continues to suffer the disruption of the demographics, where a non-Kuwaiti 68% of the total population of around four million people, and the Kuwaitis ratio exceeding 32%, so there should be planners search for the best mechanisms for the development of the potential of future generations and enable them to contribute to the serious economic activity.
I've already been to the Government of Kuwait that has developed in the year 2010 development plan for the four years ending in 2014, at a cost of 32 billion dinars (more than $ 108 billion), but it turns out its end, the government has not only spend 13 billion dinars, equivalent to about 40% of the allocation plan , indicating the neglect of the government and the inability of institutions for the implementation of projects, and emphasizes specialized reports issued by the relevant international institutions, that the implementation of the business in Kuwait is a slow process, so that became the late degrees in all international standards.
There is no doubt that the objectives ambitious capital expenditure may have contributed to the recovery of the total investment, is supposed to continue to provide support for investment during the years 2015 -2016, as the recent National Assembly approval for all of the investment the government's plan for the period 2015 -2020, and the budget for capital expenditure for the year new financial reflect the government's commitment in earnest desire to revive spending on infrastructure projects.
The aim of the new plan to hire a capitalist during the next five years at a rate of 11.8 billion dinars (about US $ 40 billion) a year, the government raised the contribution of the public sector at 6.3 billion dinars ($ 21.3 billion) a year, that the private sector invests the remaining amount to expand its business, a development positive to become the private sector play a pivotal role in the plan.
Rationalize spending
Kuwait has benefited from surpluses accumulated from oil revenues throughout the financial past 15 years, but the big public spending contributed to the wastage especially in light of the continuing financial chaos movement, has been spending rose from $ 13 billion to 77 billion, mostly spent on salaries and support prices, but noted that Salary expenses and social support may gutted about 87% of the oil revenues, and about 75% of total expenditures in the state budget for fiscal year 2014-2015.
In this regard, the Supreme Council for Planning, warned in an official report of a terrifying future, pointing out that the financial chaos will certainly reflect on the political stability, which necessitates the need for a course correction, stressing the need to review and rationalization of support and stop approvals unexplained cadres and financial privileges for workers.
Although there are some indicators of financial abundance, the economic reality in the country at the present stage is moving in the path of the slope and sharply, and involves huge challenges and risks heavy costs if it continues growing spending Unless remedy this financial chaos or reduce it. This will lead inevitably to take harsh measures on the economy may have social and political repercussions, God forbid. Here requires emphasis on the need and the importance of correcting the budget process and activate the role of the private sector in carrying out its responsibility and participation of the government in its burdens through national action and participation to all, led and supervised by the government as the dominant interests of the state and policy in accordance with Article 123 of the Constitution.
It should be noted that the Minister of Finance report to the National Assembly includes several proposals to rationalize public spending to the state, but is important to the proper implementation of them as soon as possible to avoid the financial and economic deterioration of the State of Kuwait.
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